Strategic Management At Zhujiang Iron And Steel Company Harvard Case Solution & Analysis

INTRODUCTION

Zhujiang Iron and Steel Company (ZISCo) is a Chinese-owned enterprise, which was founded in 1997. It is one of China’s key national projects in the national Ninth Five-Year Plan. ZISCo is a steel manufacturing company, which produces a wide steel sheet and plates that are used in various other products. The first production line of the company started its operation in 1999 of crude steel and sheet products. On the other hand, the second production line was completed in February 2003 with an annual production capacity of two million tons.

ZISCo is an important strategic business unit within Guangzhou Iron and Steel Enterprise Holding Limited (GISE). In March 2003, Ruosheng Zhang became the president of ZISCo and implemented a value creation strategy in the company. The objective of the company is to provide quality products and services to its buyers. The thin steel sheets are the core products of the company that are used for making standard shipping containers. Before 2003, ZISCo pursued a differentiation strategy with a focus on domestic niche markets because the company was new in the steel market. Due to the huge competition in the steel industry, ZISCo failed to achieve economies of scale, minimum costs, high product quality and mass volume of production.

Moreover, this strategy also increased selling costs and inventory costs, reduced the bargaining power of a company with suppliers, and created coordination and cooperation problems. During 1999-2002, the company failed to achieve its target due to the high financial costs, low-margin products, and high procurement costs. ZISCo faced many challenges in the key areas of business strategy, production, sales, procurement and human and this resulted in poor financial problem. The company should initiate an effective strategy to overcome these problems and challenges and to gain competitive advantage and increase revenue shortly.

PROBLEM STATEMENT

According to the case, ZISCo faced various challenges in early 2007 such as new organizational culture change, knowledge management, competitive advantage sustainability, and developing the organization and learning capability. The company should develop a strategy to overcome these challenges and problem to achieve a long term goal and objective. Moreover, the company should propose a strategy to implement value creation effectively and efficiently. Furthermore, it is important for the company to concentrate on market development or cost reduction and improving quality to increase its market share.

This case is about change management and strategy implementation. Therefore, it is important to conduct SWOT analysis, and Porter’s five forces model. However, these analyses help to identify possible alternatives, drive the best solution and set a course of action and recommendations.

SWOT ANALYSIS

Strength

One of the major strengths of the company is that it is the first compact strip producer (CSP) in China. Moreover, the other strengths include support from the parent company (GISE), value creation strategy, technology and engineering expertise, employees at university level education, and same person acts as party secretary and as Chairman of the Board of Directors. Furthermore, strengths include technology's leading role in Chinese industry, consolidation of the supplier base, no distribution channel, project based organizational structure, and one-stop-service for Chinese container manufacturers.

Weaknesses

The change in organizational culture is slow and the organizational system for strategic management is not well established. One of the major weaknesses includes is that it is a oriented enterprise, serving low volume customers, low staff morale, and missing large profit opportunities. The internal department of the company is not coordinated and cooperated.

Moreover, the weaknesses include weak organizational structure and culture to adapt value creation goal, and objective, low financial performance, high annual interest on bank loans, and ZISCo outsourced most of its auxiliary services.

Strategic Management At Zhujiang Iron And Steel Company Case Solution

Opportunities

One of the major opportunities for the company is the growing steel demand within or outside China. Moreover, opportunities include if the company improves quality and reduces costs then it can better position itself, however, it needs to become a market-oriented enterprise and consider value creation to gain competitive advantage.

Furthermore, opportunities include emerging market of container manufacturer; target another market such as auto, appliances, and steel furniture manufacturing, and the company preference towards stainless steel to attract more customers. Lastly, it should build new cities and skyscrapers worldwide so that the consumption of iron and steel would increase. These opportunities will help the company to gain maximum profits and revenue in the future.....................

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